NAR: First-Time Buyer Tax Credit Starting To Show Results

-low mortgage interest rates boosted pending home sales for the third consecutive month, with some benefit now from the first-time home buyer tax credit, according to the National Association of Realtors (NAR). The Pending Home Sales Index, a forward-looking indicator based on contracts signed in April, rose 6.7% to 90.3 from a reading of 84.6 in March, and is 3.2% above April 2008, when it was 87.5. Lawrence Yun, NAR chief economist, says buyers are responding to very favorable market conditions. "Housing affordability conditions have been at historic highs, but now, the $8,000 first-time buyer tax credit is beginning to impact the market," he says. "Since first-time buyers must finalize their purchase by Nov. 30 to get the credit, we expect greater activity in the months ahead, and that should spark more sales by repeat buyers." The Pending Home Sales Index in the Northeast shot up 32.6% to 78.9 in April and is 0.8% above a year ago. In the Midwest, the index rose 9.8% to 90.4 and is 11.1% above April 2008. The index in the South slipped 0.2% to 93.0 in April but is 3.5% higher than a year ago. In the West, the index rose 1.8% to 94.8 but is 2.9% below April 2008. NAR's Housing Affordability Index (HAI) is in record territory, the group says. The affordability index rose to 174.8 in April from an upwardly revised 171.9 in March, and was the second highest monthly reading on record after peaking at 176.9 in January of this year. The HAI is a broad measure of housing affordability, using consistent values and assumptions over time, and examines the relationship between home prices, mortgage interest rates and family income. Tracking began in 1970. Yun cautions that the reporting sample for pending home sales is smaller than that of existing-home sales, so it is subject to greater variability. "In addition, the relationship between contracts on pending home sales and closings on existing-home sales is taking longer than in the past for several reasons," he adds. "Mortgage processing time has increased, it is taking many months to close on those homes requiring short sales with lender approval and some sales are falling through at the last moment." The total number of existing-home sales is expected to improve but with dramatic local market variation in the timing of recovery. "The market has already bottomed in some areas, but this is an unusual housing cycle, with some areas improving rapidly while others languish or decline," Yun says. SOUR